Why Earnings Season Could Be Great for GameStop (GME)

Investors are always looking for stocks that are poised to beat at earnings season and GameStop Corp. (GME) may be one such company. The firm has earnings coming up pretty soon, and events are shaping up quite nicely for their report.

That is because GameStop is seeing favorable earnings estimate revision activity as of late, which is generally a precursor to an earnings beat. After all, analysts raising estimates right before earnings—with the most up-to-date information possible—is a pretty good indicator of some favorable trends underneath the surface for GME in this report.

In fact, the Most Accurate Estimate for the current quarter is currently at 21 cents per share for GME, compared to a broader Zacks Consensus Estimate of 19 cents per share. This suggests that analysts have very recently bumped up their estimates for GME, giving the stock a Zacks Earnings ESP of 10.53% heading into earnings season.

Why is this Important?

A positive reading for the Zacks Earnings ESP has proven to be very powerful in producing both positive surprises, and outperforming the market. Our recent 10 year backtest shows that stocks that have a positive Earnings ESP and a Zacks Rank #3 (Hold) or better show a positive surprise nearly 70% of the time, and have returned over 28% on average in annual returns (see more Top Earnings ESP stocks here).

Given that GME has a Zacks Rank #3 (Hold) and an ESP in positive territory, investors might want to consider this stock ahead of earnings. Clearly, recent earnings estimate revisions suggest that good things are ahead for GameStop, and that a beat might be in the cards for the upcoming report.

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